Back in 1914 a third major league started called the Federal League of Base Ball Clubs to provide an alternative to the National League and the American League. They started off successfully, and managed to lure both big name players and managers away from the baseball establishment to add credibility to this upstart Federal League. Still, there were roadblocks put in the way of personnel movement which resulted in league founder John T. Powers to file an anti-trust lawsuit against the AL and NL. The suit was heard by Judge Kenesaw Mountain Landis who stalled long enough for the Federal League to run out of money and thus no longer pose a threat to the baseball establishment. Not coincidentally, Landis later became the Commissioner of Baseball in recognition for what he’d done to preserve the game (if not free trade).
The dissolution of the Federal League was not a neat and clean act. Some teams were bought out by major league teams. Some Federal League teams were offered the chance to buy major league teams. The Baltimore Terrapins, however, were excluded from both and decided to bring its own lawsuit claiming that baseball had violated the Sherman Anti-Trust Act. Surprisingly they won the verdict and the award of $80,000 was tripled to $240,000. However, upon appeal the verdict was overturned and it was heard a third time by US Supreme Court. In 1922 Justice Oliver Wendell Holmes sided with the Appeal Court and said that baseball did not institute interstate commerce and was a state’s issue, thus not falling within the definition of anti-trust outlined in the Sherman legislation.
In 1953 the first major challenge to the exemption was brought by a minor leaguer in the Yankees organization named George Toolson who was successfully pitching for the powerhouse organization with no room in the Bronx for him to play. When the Newark Bears folded in 1950 the Yankees reassigned him to the single A Binghamton Triplets. He refused to report, saying that it was restraint of trade that kept him from signing on with another organization at the AAA or major league level and that his contract had expired with the dissolution of the Bears ballclub. It was felt that with the improvements to the interstate highway system, radio and television broadcasts that commonly crossed state lines, baseball was indeed an interstate operation and that the exemption basis from 1922 no longer applied. The Supreme Court upheld the earlier Federal League ruling.
To this day, baseball enjoys that same interpretation. The most profound impact concerns the movement of franchises. Unlike Al Davis’ successful challenge that enabled him to move the Raiders from Oakland to Los Angeles in the NFL, baseball itself must approve all franchise relocations. There’s currently a challenge being filed by the City of San Jose who wants to move the Oakland A’s there. It is similar to other actions attempted and failed in the past, as the courts have routinely upheld the total exemption from Anti-Trust legislation for the sport of baseball.
The biggest challenge ever made was the Curt Flood vs. Bowie Kuhn case filed when Flood was traded without his authorization from the St. Louis Cardinals to the Philiadelphia Phillies. He felt that a veteran player should have some say in who was his employer. Flood lost his challenge and his options were to play for the Phillies or to retire. He chose to sit out the 1970 season and was eventually traded to the Washington Senators for whom he played 13 games in 1971 before retiring for good. Six years later Marvin Miller took a different approach and challenged the reserve clause through other channels with pitchers Andy Messersmith and Dave McNally. Arbitrator Peter Seitz (hired by the owners) ruled that players who would complete one year of service without signing a contract with their current club would void the reserve clause, thus ushering in the concept of free agency. (Seitz, incidentally, was immediately fired by the owners who subsequently lost the appeal of his decision).
It will be interesting to see how things may change under the new commissioner Rob Manfred.